LeRette v. Howard , 300 Neb. 128 ( 2018 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
08/24/2018 01:09 AM CDT
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LeRETTE v. HOWARD
Cite as 300 Neb. 128David LeR ette, Jr., individually and as owner
of M aster Blaster, I nc., appellants and
cross-appellees, v. Steven H. Howard and
Dowd, Howard & Corrigan, L.L.C.,
appellees and cross-appellants.
___ N.W.2d ___
Filed June 1, 2018. No. S-17-580.
1. Jurisdiction: Appeal and Error. Subject matter jurisdiction is a ques-
tion of law for the court, which requires an appellate court to reach a
conclusion independent of the lower court’s decision.
2. Judgments: Verdicts: Appeal and Error. Review of a ruling on
a motion for judgment notwithstanding the verdict is de novo on
the record.
3. Trial: Appeal and Error. The standard of review of a trial court’s
determination of a request for sanctions is whether the trial court abused
its discretion.
4. Actions: Parties. The purpose of Neb. Rev. Stat. § 25-301 (Reissue
2016) is to prevent the prosecution of actions by persons who have no
right, title, or interest in the cause.
5. Actions: Parties: Public Policy. Neb. Rev. Stat. § 25-301 (Reissue
2016) discourages harassing litigation and keeps litigation within certain
bounds in the interest of sound public policy.
6. Actions: Parties: Standing. The focus of the real party in interest
inquiry is whether the party has standing to sue due to some real inter-
est in the cause of action, or a legal or equitable right, title, or interest
in the subject matter of controversy. The purpose of the inquiry is to
determine whether the party has a legally protectable interest or right in
the controversy that would benefit by the relief to be granted.
7. Actions: Pleadings: Parties. The character in which one is a party to
a suit, and the capacity in which a party sues, is determined from the
allegations of the pleadings and not from the caption alone.
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Cite as 300 Neb. 1288. Judgments: Verdicts. On a motion for judgment notwithstanding the
verdict, the moving party is deemed to have admitted as true all rel-
evant evidence admitted that is favorable to the party against whom the
motion is directed, and, further, the party against whom the motion is
directed is entitled to the benefit of all proper inferences deducible from
the relevant evidence.
9. ____: ____. To sustain a motion for judgment notwithstanding the
verdict, the court resolves the controversy as a matter of law and may
do so only when the facts are such that reasonable minds can draw but
one conclusion.
10. Attorneys at Law: Attorney Fees: Conflict of Interest. An attorney
who violates established rules of professional conduct and performs
services despite a conflict of interest may not receive compensation for
such services.
11. Judgments: Words and Phrases. An abuse of discretion occurs when
a trial court’s decision is clearly against justice or conscience, reason,
and evidence, or when the decision unfairly deprives the litigant of a
substantial right or a just result.
Appeal from the District Court for Douglas County: Timothy
P. Burns, Judge. Affirmed as modified.
Ronald J. Palagi and Donna S. Colley, of Law Offices of
Ronald J. Palagi, P.C., L.L.O., and Kathy Pate Knickrehm
for appellants.
David A. Domina, of Domina Law Group, P.C., L.L.O., for
appellees.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke,
JJ., and Steinke, District Judge.
Steinke, District Judge.
NATURE OF CASE
The jury found in favor of the plaintiffs on a claim for legal
malpractice and fraudulent misrepresentation and awarded
$775,000. After trial, the district court overruled the plaintiffs’
motion for sanctions and partially granted the defendants’
motion for judgment notwithstanding the verdict (JNOV),
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LeRETTE v. HOWARD
Cite as 300 Neb. 128reducing the damages to $235,968.78. The plaintiffs appeal,
and the defendants cross-appeal, challenging the district
court’s subject matter jurisdiction.
BACKGROUND
In November 2013, David LeRette, Jr., individually and as
the owner of Master Blaster, Inc., filed a complaint against
Steven H. Howard and his law firm, alleging, among other
things, that Howard committed legal malpractice and breached
his duty as LeRette’s attorney when he failed to advise LeRette
of his conflicts of interest and when he acted adversely to
LeRette’s interests. A jury trial was held on the matter in early
2017. From the evidence presented, we adduce the following
set of facts.
M aster Blaster’s Judgment
Against A nderson
In 2006, LeRette sold certain assets of his business, Master
Blaster, to Johnnie Anderson. Pursuant to the purchase agree-
ment, Anderson executed a promissory note to Master Blaster
for $350,000 with 12 percent annual interest. After three pay-
ments, Anderson defaulted on the note.
Master Blaster filed suit for the balance owed. During those
proceedings, Master Blaster was represented by Sandra L.
Maass.
Anderson then filed for bankruptcy. Master Blaster’s suit
against Anderson was stayed. In the bankruptcy proceeding,
Master Blaster challenged the discharge of Anderson’s debt
to Master Blaster. The bankruptcy court ultimately granted
Master Blaster’s request after finding that omissions and mis-
statements in Anderson’s schedules and statements of finan-
cial affairs were inaccurate, unreliable, and constituted inten-
tional or reckless indifference to the truth. Thereafter, the stay
was lifted from Master Blaster’s suit against Anderson. In
2009, Master Blaster secured a judgment against Anderson for
$470,020.39 plus interest.
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Cite as 300 Neb. 128Legal M alpractice Action Against
A nderson’s Bankruptcy Attorneys
LeRette’s bankruptcy attorney thought Anderson’s bank-
ruptcy attorneys may have been negligent in their represen-
tation of Anderson and suggested to LeRette that Anderson
could pursue a legal malpractice claim against them in order
to generate funds that could be used to satisfy his debt to
Master Blaster. Based on this information, LeRette contacted
Maass, who told LeRette that she thought her former class-
mate, Howard, might be able to help.
With LeRette’s approval, Maass called Howard to discuss
the matter. Howard indicated that he was interested in the
case. Thereafter, Maass gave Howard’s contact information to
LeRette, who then called Howard.
After talking to Howard, LeRette contacted Anderson and
asked him if he was interested in pursuing a legal malpractice
claim against his bankruptcy attorneys. Anderson indicated
that he was, and LeRette and Anderson met at a fast food res-
taurant to discuss it. According to LeRette, he told Anderson
that he would hire the attorney.
LeRette then called Howard and scheduled a meeting in
Howard’s law office for May 1, 2009. Howard told LeRette
to bring Anderson, which he did. At the meeting, Howard
advised LeRette and Anderson that any proceeds from the
suit would be used to satisfy the judgment against Anderson.
Howard advised LeRette not to execute on the judgment
against Anderson, because it would make the case more dif-
ficult for Howard. LeRette did not execute on the judgment.
According to LeRette, Howard told him that he could not be
named in the malpractice action, because malpractice suits can-
not be assigned. But Howard represented that the suit would
be successful and that LeRette would “get [his] money and
get paid.”
Howard filed the legal malpractice claim against the bank-
ruptcy attorneys in October 2009.
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Cite as 300 Neb. 128Mediation and Settlement
Agreement
In March 2012, a mediation of the legal malpractice suit
against Anderson’s bankruptcy attorneys occurred. Howard,
LeRette, and Anderson were all present. According to LeRette,
he met with Howard before the mediation to discuss what
settlement amounts might be acceptable. The mediation ulti-
mately reached an impasse.
Thereafter, the mediator issued a proposal in which he rec-
ommended that the parties settle for $350,000, with Anderson
to receive $0, LeRette to receive $300,000, and Howard to
receive $50,000 for his fees. The proposal was not accepted.
On July 23, 2012, without discussing the matter with
LeRette, Howard settled the legal malpractice action for
$350,000. Howard deposited the settlement proceeds into his
firm’s trust account and dispersed $235,964.78 to Anderson,
retaining the remaining $114,035.22 in payment of his fees
and expenses. Anderson did not pay LeRette, and LeRette
never received any of the settlement proceeds.
According to LeRette, he stopped receiving informa-
tion from Anderson and Howard after the mediation. When
LeRette followed up with the malpractice case, he was told
that the trial was to occur on October 29, 2012. Sometime
later, LeRette learned about the settlement and the payment
and filed the suit against Howard and his law firm.
Evidence of Damages
At the trial, LeRette sought to prove that Howard’s legal
malpractice and fraudulent misrepresentations caused him
damages.
As evidence of those damages, LeRette called a univer-
sity finance professor to testify. The witness calculated what
Master Blaster’s judgment against Anderson would have been
worth beginning in April 2009 through February 2017. A docu-
ment of his calculations was entered into evidence. According
to the document, the value of Master Blaster’s judgment at the
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Cite as 300 Neb. 128time of the trial was either $1,209,614 or $1,276,038, depend-
ing on whether a penalty was included.
Relevant to the value of Anderson’s claim against his bank-
ruptcy attorneys, an offer of judgment filed by Howard was
admitted into evidence. In the offer, Anderson offered to accept
an entry of judgment against the bankruptcy attorneys in the
amount of $1 million.
Jury Verdict
At the conclusion of the evidence, the jury was instructed
on two theories: legal malpractice and fraudulent misrepre-
sentation. After the case was submitted, the jury returned a
general verdict for LeRette and Master Blaster with damages
of $775,000.
Damages R educed
After trial, Howard and his law firm filed a motion for
JNOV, to alter or amend judgment, and for a new trial. In the
motion, Howard and his firm alleged, among other things, that
the judgment was not supported by sufficient evidence and that
the jury awarded excessive damages. A hearing on the motion
was held, and on May 5, 2017, the district court issued an order
reducing the damages from $775,000 to $235,968.78, which
was the amount Anderson received in the settlement.
In reducing the damages to the amount that Anderson
received in the settlement, the district court reasoned:
There was no evidence adduced at trial that . . . Howard
could have obtained a more favorable settlement for
Anderson or that he performed deficiently in reaching
the settlement. It is clear from the evidence at trial that
Anderson was the only one with a legal claim against the
bankruptcy attorneys, and he agreed to settle the case for
$350,000 in which he received $235,968.78.
The only damages [LeRette and Master Blaster] could
have sustained, as a proximate cause of . . . Howard[’]s
negligence or misrepresentations, was not seeing that
LeRette [and Master Blaster] received all or part of the
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Cite as 300 Neb. 128settlement proceeds received by Anderson. Under the
facts presented to the jury, the amount Anderson received
would equal the most [LeRette and Master Blaster] could
have received as damages. The Court finds, as a matter of
law, that this amount was the only damages that [LeRette
and Master Blaster] are entitled [to].
Motion for Sanctions
After the trial, LeRette filed a motion for sanctions, request-
ing that the trial court strike Howard and his law firm’s
answer, award attorney fees and costs to LeRette and Master
Blaster, and disgorge the attorney fees received by Howard
and his law firm in the underlying legal malpractice suit. The
district court overruled the motion.
On appeal, LeRette and Master Blaster argue that the district
court erred in overruling the motion, because the evidence
shows that Howard failed to comply with discovery requests
and committed fraud upon the court. LeRette and Master
Blaster argue that a pattern of misconduct by Howard and his
law firm warranted sanctions and that the trial court’s failure to
impose sanctions constituted an abuse of discretion.
ASSIGNMENTS OF ERROR
LeRette and Master Blaster assign that the trial court erred
in reducing the jury’s award of damages and in overruling the
motion for sanctions.
Howard and his law firm cross-appeal, assigning that the
trial court erred in failing to dismiss LeRette and Master
Blaster’s complaint for want of subject matter jurisdiction.
STANDARD OF REVIEW
[1] Subject matter jurisdiction is a question of law for the
court, which requires an appellate court to reach a conclusion
independent of the lower court’s decision.1
1
Deutsche Bank Nat. Trust Co. v. Siegel, 279 Neb. 174, 777 N.W.2d 259(2010).
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LeRETTE v. HOWARD
Cite as 300 Neb. 128[2] Review of a ruling on a motion for JNOV is de novo on
the record.2
[3] The standard of review of a trial court’s determination
of a request for sanctions is whether the trial court abused
its discretion.3
ANALYSIS
Subject M atter Jurisdiction
Before addressing LeRette and Master Blaster’s assign-
ments, we first consider Howard and his law firm’s assign-
ment regarding subject matter jurisdiction. They argue that
because the judgment debt was owned by the corporation
Master Blaster and not by LeRette, LeRette was not the real
party in interest. Howard and his firm contend that because
LeRette was not the real party in interest, he lacked standing
to sue, and that therefore, the trial court lacked subject mat-
ter jurisdiction.
[4-6] Indeed, Neb. Rev. Stat. § 25-301 (Reissue 2016)
requires that except as otherwise provided by statute, all cases
are to be brought “in the name of the real party in interest.”
The purpose of § 25-301 is to prevent the prosecution of
actions by persons who have no right, title, or interest in the
cause.4 Section 25-301 also discourages harassing litigation and
keeps litigation within certain bounds in the interest of sound
public policy.5 The focus of the real party in interest inquiry is
whether the party has standing to sue due to some real interest
2
See Bellino v. McGrath North, 274 Neb. 130, 133, 738 N.W.2d 434,
439 (2007) (“[t]o sustain a motion for [JNOV], the court resolves the
controversy as a matter of law and may do so only when the facts are
such that reasonable minds can draw but one conclusion”), and Hauser
v. Nebraska Police Stds. Adv. Council, 264 Neb. 605, 650 N.W.2d 760(2002) (questions of law are reviewed de novo on record).
3
Malchow v. Doyle, 275 Neb. 530, 748 N.W.2d 28 (2008).
4
Manon v. Orr, 289 Neb. 484, 856 N.W.2d 106 (2014).
5
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Cite as 300 Neb. 128in the cause of action, or a legal or equitable right, title, or
interest in the subject matter of controversy.6 The purpose of
the inquiry is to determine whether the party has a legally pro-
tectable interest or right in the controversy that would benefit
by the relief to be granted.7
The crux of Howard and his law firm’s jurisdictional argu-
ment rests on the premise that Master Blaster was not named a
party to this action. A review of the operative pleadings, how-
ever, reveals otherwise.
[7] We have held that the character in which one is a party
to a suit, and the capacity in which a party sues, is determined
from the allegations of the pleadings and not from the cap-
tion alone.8
Here, the caption of the operative complaint, as well as its
body, support that both LeRette and Master Blaster were par-
ties to the action. The caption of the operative complaint identi-
fies the “[p]laintiffs” as “DAVID LERETTE, JR., Individually,
and as owner of MASTER BLASTER, INC.” We notice that
the caption uses the plural form of the term “plaintiff” and
that it also lists both LeRette and Master Blaster in capital
letters, which is traditionally done with parties. In the body
of the operative complaint, under the “STATEMENT OF THE
FACTS” heading, Master Blaster was again specifically identi-
fied as a plaintiff.
We also conclude that the jury instructions, the verdict form,
the amended judgment, and the postjudgment motion for sanc-
tions all support that both LeRette and Master Blaster were
parties to the action. Each of these filed documents uses the
plural form of the term “plaintiff” and refers to both LeRette
and Master Blaster.
6
Id.7
Id.8
Zapata v. McHugh, 296 Neb. 216, 893 N.W.2d 720 (2017); Steinhausen v.
HomeServices of Neb., 289 Neb. 927, 857 N.W.2d 816 (2015).
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Cite as 300 Neb. 128Because the allegations of the pleadings sufficiently iden-
tify Master Blaster as a party plaintiff, Howard and his law
firm’s argument that this court lacks jurisdiction because this
action was not brought by the real party in interest is with-
out merit.
R eduction of Jury Award
We next consider LeRette and Master Blaster’s assignment
that the district court erred in partially granting Howard and
his law firm’s motion for JNOV and reducing the jury’s award
of damages.
[8,9] On a motion for JNOV, the moving party is deemed
to have admitted as true all relevant evidence admitted that
is favorable to the party against whom the motion is directed,
and, further, the party against whom the motion is directed is
entitled to the benefit of all proper inferences deducible from
the relevant evidence.9 To sustain a motion for JNOV, the court
resolves the controversy as a matter of law and may do so only
when the facts are such that reasonable minds can draw but
one conclusion.10
LeRette and Master Blaster assert that the trial court erred
in reducing the damages to $235,968.78, the amount Anderson
received in the settlement. He argues that reasonable minds
could have concluded that LeRette and Master Blaster were
entitled to $775,000. We disagree.
LeRette and Master Blaster’s argument is based on the
premise that the damages resulting from Howard’s legal mal-
practice are equal to the value of Master Blaster’s judgment
against Anderson. Such premise would be true if Anderson’s
legal malpractice claim had gone to trial and been success-
ful. Then, Anderson’s damages would include the damages
resulting from the bankruptcy attorney’s failure to have Master
Blaster’s judgment discharged.
9
Bellino, supra note 2.
10
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Cite as 300 Neb. 128However, LeRette and Master Blaster did not present evi-
dence to support a finding that Anderson’s malpractice action
would have been successful had it proceeded to trial. Nor did
they present evidence that Howard was negligent or acted defi-
ciently in securing the $350,000 settlement or that he could or
should have secured a greater settlement.
LeRette and Master Blaster did, however, present evidence
to support a finding that Howard was negligent in advising
LeRette not to execute on the judgment, in representing that
LeRette would receive the proceeds, and in cutting LeRette
out of the settlement proceeds. With regard to executing on
the judgment, the evidence showed that at all relevant times,
Anderson had no assets except for various tools and “a partly
put together vehicle.” Because any damages resulting from the
executing advice was minimal, the only damages proximately
caused by Howard’s negligence or misrepresentations was in
not seeing that LeRette and Master Blaster received the settle-
ment proceeds.
[10] Although the district court reduced the award to the
amount that Anderson received in the settlement, we modify
that amount to include the amount Howard received in the
settlement. We so modify the award, because an attorney who
violates established rules of professional conduct and performs
services despite a conflict of interest may not receive com-
pensation for such services. In State ex rel. FirsTier Bank v.
Mullen,11 we explained:
We do not accept the contention that an attorney can
receive fees for representation which from the outset
gives the appearance of impropriety and is violative of
established rules of professional conduct. An attorney
may not recover for services rendered if those services
are rendered in contradiction to the requirements of
11
State ex rel. FirsTier Bank v. Mullen, 248 Neb. 384, 390, 534 N.W.2d 575,
580 (1995).
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Cite as 300 Neb. 128professional responsibility and inconsistent with the char-
acter of the profession.
It is an established rule of professional conduct that a law-
yer may not represent a client if the representation involves a
concurrent conflict of interest, unless, among other things, the
client is advised of the conflict and consents to it.12
Here, we must assume that Howard failed to advise LeRette
and Anderson of his conflict of interest. Because a general ver-
dict does not specify the basis for an award, Nebraska law pre-
sumes that the winning party prevailed on all issues presented
to the jury.13 One of the issues presented to the jury was that
Howard failed to advise LeRette and Anderson of his conflict
of interest.
Because Howard violated the rule regarding representations
involving conflicts of interest, we conclude that, as a matter of
law, Howard is not entitled to compensation for his services in
the settlement. Thus, we modify the jury award to include the
$114,035.22 that he received for those services.
Motion for Sanctions
[11] Finally, LeRette and Master Blaster claim that the
trial court abused its discretion in overruling their postver-
dict motion for sanctions against Howard and his law firm.
An abuse of discretion occurs when a trial court’s decision is
clearly against justice or conscience, reason, and evidence, or
when the decision unfairly deprives the litigant of a substan-
tial right or a just result.14
Although the trial court did not explain its reasoning for
denying LeRette and Master Blaster’s motion for sanctions,
we think it likely did so because it found that Howard was
12
See Neb. Ct. R. of Prof. Cond. § 3-501.7.
13
Heckman v. Burlington Northern Santa Fe Ry. Co., 286 Neb. 453, 837
N.W.2d 552 (2013).
14
See Coral Prod. Corp. v. Central Resources, 273 Neb. 379, 730 N.W.2d
357 (2007).
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Cite as 300 Neb. 128not acting in bad faith when he sought to protect, based on
­attorney-client privilege, his files and the confidential informa-
tion of his client, Anderson. Because we see no abuse of dis-
cretion, we find that this assignment is without merit.
CONCLUSION
For the reasons set forth above, we affirm the district court’s
partial granting of Howard and his law firm’s JNOV, but mod-
ify the jury award from $235,964.78 to $350,000.
A ffirmed as modified.